For more information about Vanguard funds, visit vanguard.com or call 877-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

All investing is subject to risk, including the possible loss of the money you invest.

When I heard the news about the United Kingdom’s decision to leave the European Union (E.U.), my first thought was of the uncertainty that’s in store for the global economy, the political arena, and investors. Investors across the globe are eager to know how their portfolio will be impacted by the U.K.’s pending departure.

While the U.K. figures out its relationship with its E.U. partners, some degree of uncertainty is likely to continue. But while the complex conversations and negotiations among global political and economic officials ensue, investors are left to wonder: What does this mean for my portfolio? What should I do?

How I approach client conversations during market turmoil

When clients call me, concerned about the 500-point drop in Dow futures that greeted them on Friday morning, I have a focused plan for our discussion.

Expect volatility

I start by listening to their concerns so I can understand their perspective. Market volatility doesn’t surprise me, but I understand how upsetting it can be because I’m an investor too. Just like my clients, I work hard to save money, and it’s unsettling to see my balance fall by 1%, 2%, or 3% in a day, or possibly even 5%–10% or more in a week. But this level of market movement is expected. In fact, the S&P 500 has been in either a correction or bear market 40% of the time since 1928, but in spite of this, the average annual return for the index is 10% over this same period (see this article for more data on corrections and bear markets).

Trust your asset allocation

Next, I turn the conversation back to my clients’ long-term goals. For example, what’s happening in the United Kingdom hasn’t changed the fact that clients may want to retire in ten years, travel, and leave a legacy to their children. And it’s these goals, which are very personal, that informed their target asset allocation—the diverse mix of stocks, bonds, and short-term reserves that was carefully selected to lessen the impact of market volatility in global situations like this.

When I work with a client to build a portfolio, I simulate various market conditions—based on current and historical data—for the portfolio to forecast how likely it is to meet the client’s specific goals. During times of market volatility, my clients and I can revisit this simulation for reassurance that their portfolio is prepared to weather negative markets. (Most client portfolios have an allocation to bonds, which can buffer stock volatility, to provide stability in times of market stress. And, as this article highlights, high-quality bonds are—and have been—doing their job.)

Regardless of short-term volatility, I encourage clients to focus on the long-term expected returns for their portfolio based on the asset allocation we’ve agreed upon. (If you aren’t sure how well your asset allocation aligns with your goals, take our Investor Questionnaire. If you need more help, consider partnering with an advisor.)

Stay diversified

Finally, I respond to the question “Should I change my international holdings?” with a committed “No.” Making a change to your portfolio in response to world news would be considered market timing, which is usually a losing strategy. We can’t predict how low the market will go in times of market turmoil, nor can we pinpoint precisely when (or to what extent) it will rebound.

It’s important to maintain a well-diversified portfolio throughout your investment time horizon. Attempting to adjust your portfolio in response to the latest news headlines is a game you probably won’t win—it may not only hinder your ability to meet your goals over the long term but also may keep you from achieving your desired results completely.

Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

Diversification does not ensure a profit or protect against a loss. All investing is subject to risk, including the possible loss of the money you invest.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

Julie Virta

Julie Virta is a senior financial advisor with Vanguard Personal Advisor Services®. She has more than 20 years of experience in the financial services industry. Since joining Vanguard in 1999, Julie has been providing financial planning and advisory services to high-net-worth clients. She is a Certified Financial Planner™ professional and a Chartered Financial Analyst charterholder with a bachelor’s degree in finance and marketing from Boston College.

Comments

Donna M. | September 21, 2016 1:27 pm

For myself, being mortgage free is one of the pleasures of being retired. I paid off my mortgage before retiring and I can tell you it’s a great feeling. The monthly payment I was paying for the mortgage now goes into savings. d

Stephen M. | August 26, 2017 3:56 pm

Pay off the mortgage before retiring? What if the interest rate on the mortgage is only 2.75%, which mine was? You think I should take money that can
earn 5% in a bond fund to pay off a deductible mortgage that costs only 2.75%?That’s insane!

Bob B. | August 10, 2016 3:57 pm

I was baptized by fire. When I retired in Nov 2007, I had all my IRA in cash reserves. As 2008 progressed, the market was going down and I decided to invest 10-20% at every 700 point drop such that by May or June, I was 60-70% in. Well, you must know how that worked by now — My record shows I made 7+% compounded through 2015 when I lost $10,000. Part of my ongoing strategy is buy on panic (Flash crash, Brexit, etc.) and back off near the tops to <25%. This year, I'm like 5% so far. Leveraging my 3.6% mortgage has been helpful, too.

Robert B. | July 29, 2016 3:09 pm

I am 75 years old and have a 50/50 allocation which is up 5.5% this year. This is highest I have ever been in equities, but bonds have done well in 2016. I surely don’t expect that to continue, but the market looks very uncertain now, so I will wait to re-balance. One of the constant recommendations from Vanguard is to have 20-40% invested in foreign equities. I understand the logic, but when I look at the returns over the last several years, they have been poor. Why the continued recommendation when other equity classes have higher long term returns? Short term returns I pay little attention to when making investing decisions, but long term returns I do. Does someone have better insight that I do?

Donald G. | September 23, 2016 7:54 pm

To Robert B.7-29-16 Sir you mentioned that you were a long time investor with Vanguard.You also stated that you had an aversion to investing abroad because of PAST returns in the foreign sector.That is the key in my view, no one knows what the international funds are going to do in the FUTURE.Investors in Japan thought the same thing over a decade ago. Why invest abroad when they thought they could get every thing they needed right at home.Millions of retirees accounts were lost when the Japanese market tanked and they are still trying to recover.Vanguard has preached diversify for over 40 years to keep its clients from making this same mistake.Maybe you should wade into this with an increasing 10% exposure each year. In order to buy the whole market you need to buy the different aspects of it. Good Luck to you Sir!

Leslie S. | October 13, 2016 3:11 pm

I have a lot of trepidation about investing in so much foreign stocks/bonds now, as well. My 401K’s International equity fund was so flat the last year or so, I moved my $$ out of it into Growth and Value funds, where I had a very decent return for 25 years. I’m in the process of deciding where to invest my 401K rollover funds at Vanguard, and was advised to invest quite a bit more than I’m comfortable with in international bond market index fund and international stock market index fund. Plus we have this volatile election coming up! I would hate to see another 2008.

Sinikka D. | July 7, 2016 11:23 pm

John M. | July 7, 2016 11:20 pm

Hi everybody,

Where can I find “The Retirement Portfolio” also I would like to research something I saw on this site, I can only remember entering my investible money and this site gave me four funds and how much to invest in each.

John H. | November 21, 2016 8:53 pm

Richard G. | July 5, 2016 7:24 pm

To Faisha S. and Marion F.First let me say that no one program will work for every one. We wanted a growth portfolio as we have plenty of monthly income and no debt.It asks you to do exactly what Vanguard counsels you to do. We buy the whole market with 10 index funds.We are comfortable with a 70/30 index mix.It does do one thing that most plans do not do.You do not make ANY moves based on a guess only facts.It is called The Gone Fishin Porfolio.Each year or two you bring up your program on your computer and if five of your funds have gone up you sell those and buy the five that have gone down and return to your chosen asset mix.So it forces you to buy low and sell high.I bought four or five copies and gave them to some friends at church and so far they are still speaking to me.Good Luck to you both in your programs.

Gertrude L. | July 4, 2016 7:16 pm

David P. | July 1, 2016 6:20 pm

The smartest people on the Internet (someone on a Garage Mechanics’ Journal) say that the market volatility is being driven by professionals,not small individual investors. In other words: mutual fund managers and pension fund managers. Much ado and flopping around over very little.Swapping stocks like Mr. Bogle says.And more trading costs. Britain will undoubtedly seek to continue trading agreements with its partners,much like at present,fears over forced acceptance of massive immigration from the Middle East probably drove the vote. Little or no pertinence to the economy.

Elizabeth C. | July 1, 2016 4:43 pm

Louis M. | July 1, 2016 12:22 pm

My wife and I are long time “Vanguarders” both retired since 2011. I am 66 my wife 64. We both have six figure targeted accounts plus a inheritance portfolio. We have both been drawing SS(since 2014) and I have a pension. Our income covers our monthly expenses with about $500 a month in surplus. We still have a small 15 year mortgage of about $90K with an interest rate of 3.25%. I am shopping for a refinance of the mortgage as we speak. I am still not sure if I should pay down my mortgage or proceed with the refinance. Seems wise to go for lower rate and keep earning on my accounts. Still mulling this over.

Donna M. | September 21, 2016 1:20 pm

I can tell you what I did. I paid off my mortgage when I retired. The amount I paid each month is now being reinvested. It’s such a great feeling to know that if the market crashes my home belongs to me free and clear.

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For more information about Vanguard funds, visit vanguard.com or call 877-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

All investing is subject to risk, including the possible loss of the money you invest.